2017 (1) TMI 69 - AT - Customs

Valuation - inclusion of Royalty in assessable value - there is preliminary deficiency in the facts of the case. From the facts, it is not clear that what all goods were imported by the appellant from their collaborator. It is also not known that which goods were procured from AGM. From the facts appearing in the shareholders agreement, the technical knowhow fees is towards various assistance provided by the foreign collaborator, which includes recipes, manuals for proper selection of raw material, naming possible suppliers of raw material etc. Held that - in absence of actual details of the material imported and the material procured from AGM, it cannot be ascertained, whether the technical knowhow fees has influenced the value of the imported goods. We are therefore of the considered view that the matter needs to be re-considered after ensuring the facts about the nature of the goods imported and procured indigenously from AGM and also the final product manufactured by the appellant - appeal disposed off - matter on remand.

Summary

Issues involved:
1. Inclusion of technical know-how fees and royalty in the invoice value of imported goods.
2. Interpretation of Rule 9(1)(c) of Customs Valuation Rules, 1988.
3. Application of previous judgments to the current case.

Detailed Analysis:
1. The case involved a shareholders agreement between an Indian inhabitant and a German company to start a joint venture company. The agreement included provisions for royalty payments and technical know-how fees. The revenue contended that the technical know-how fees should be included in the invoice value of imported goods, citing Rule 9(1)(c) of Customs Valuation Rules, 1988. However, the respondent argued that the fees were not related to the sale of imported goods but for production, sales, and using the brand name. The Tribunal observed a deficiency in the facts regarding the goods imported and procured domestically, leading to a lack of clarity on the influence of technical know-how fees on the imported goods' value. Consequently, the matter was remanded for further consideration to determine the impact of these fees on the imported goods' value.

2. The revenue relied on the Collector of Customs (Prev.) Vs. Essar Gujarat Ltd. case to support the inclusion of technical know-how fees in the invoice value. The respondent, on the other hand, argued that the fees were not a condition of sale for the imported goods. The Tribunal considered previous judgments such as Schenectady Herdillia Ltd., Ferodo India Pvt. Ltd., and others cited by the respondent to support their argument. The Tribunal emphasized the need for a clear understanding of the goods imported and procured domestically to assess the influence of technical know-how fees on the imported goods' value as per Rule 9(1)(c).

3. The Tribunal reviewed the arguments presented by both sides and noted the lack of clarity in the case's facts regarding the imported goods and those procured domestically. The respondent relied on various judgments to support their position that the technical know-how fees were not related to the imported goods' value. The Tribunal, after careful consideration, set aside the impugned order and remanded the case to the Original Adjudicating authority for a fresh decision based on a clearer understanding of the goods involved and their impact on the imported goods' value. The order was pronounced in court on 05/12/16.